The elephant in the room. Is it time to raise taxes? Tax deal or no tax deal?

Cenk Uygur: The government is staying open for business for now. Today the House passed a two-week extension of a funding bill that includes $4 billion of cuts from the federal budget. By the way, the Democrats wanted a four-week extension and the GOP wanted only two weeks. We were taking bets here as to which side it would be closer on. Everybody bet it would be closer to theRrepublican side. We thought maybe 16 days instead of 14 days. No, we were too optimistic. The Democrats accepted their version completely. And Steve King, right-winger in the House, voted against it anyway. It didn’t defund planned parenthood yet. Not good enough.

They say we absolutely need these cuts because it’s the only way to reduce the deficit.

Michele Bachmann: I believe that we need to keep the current tax rates at the level that they are. I’m introducing a bill today to do just that. But there’s a real problem here with all of the spending that is not paid for.

Uygur: They keep saying over and over we need to cut spending, we need to cut spending. As usual, not true. They’re presenting another false choice. There’s another way to cut the deficit, one that they refuse to consider. We can raise revenues. Yeah, that means raising taxes. And yes, are you ready for this. I hope you’re sitting. I definitely think we should raise taxes. Let me show you how much money we can raise if we just raise taxes a little bit on the top earners in the country. Not teachers, not firemen or cops. The very top bracket in the country.

In two years we could raise $91 billion by just scrapping the Bush tax cut for the top 2%. Another $23 billion by raising the estate tax. And $40 billion by raising capital gains taxes to just 20%, the level that they were under President Clinton. By the way, that’s still a comically low rate, but even that would do the job. That took me two minutes, and I raised $154 billion.

Now, I know conventional wisdom in Washington says raising taxes is political suicide. You can’t do it! But that’s also not true. Look, the poles don’t bear that out at all. Let me give you examples. In a just release New York Times-CBS poll people were asked if you had to reduce your state’s budget deficit, what would you do.? 40% said that they would raise taxes, 22% said they would decrease public employees benefits, 20% said they would decrease funding for roads, and just 3% said they would decrease funding for education. Now, do you get that. Raising taxes beats cutting public employee benefits, which, of course, is what they’re trying to do in Wisconsin, by nearly a 2:1 margin.

Now, it also beats cutting education by a more than 10 to 1 margin. 40% said raise taxes and 3% said cut education. I keep asking you this because the numbers are so clear. How much clearer can they be? Now people are saying that they would much rather pay more in taxes themselves than cut funding for these important programs.

Now wait until you see how much people like raising taxes when it only applies to the rich. A national poll from CBS News-Vanity Fair asked people, what’s the first thing you would do to balance the federal budget? 61% said they would raise taxes on the rich, 4% say they would cut medicare, and 3% said they would cut social security. Let me sum it up for you in one word: overwhelming. They keep telling you that they have to cut your social security and they have to cut your medicare. But when they ask you, the American people, you say no, raise taxes on the rich. That’s the other way to do it it.

Now I’m asking you, do we live in a Democracy or don’t we? Why are politicians ignoring the clear popular will? Unfortunately, there’s an answer to that. It’s because they’re representing the rich donors who got them elected and not you.

All right, joining me now is Former Clinton Labor Secretary Robert Reich. He’s now a professor at UC Berkeley. Great to have you here, of course.

Reich: Hi, Cenk.

Uygur: Ii want to ask you, they’ll say you can’t do this, you can’t raise taxes. In Washington people go crazy over this stuff. It’s not feasible. Why do you think it might be feasible, and how?

Reich: Of course it’s feasible. Under Dwight David Eisenhower in the 1950s, who nobody would accuse of being a socialist because he was a Republican, the income tax rate on the richest Americans was 91%. I mean, you know, we’ve been here. we’ve done this. It’s not a matter of soaking the rich. The other point that is not often talked about is that more income and wealth is now concentrated at the very top in America than we’ve seen in 80 years. I mean, we have the top 1% is taking home over 20% of total national income. So if we don’t tax people fairly, if we don’t simply go where the money is, it’s just a giant zero-sum game. It’s the middle class that is seeing no increase in income at all getting squeezed and squeezed and squeezed and losing public services that are vital to them at the same time.

Uygur: By the way, since 1979 for those of you at home that don’t know this, the top 1% have nearly quadrupled their income whereas the rest of us have stayed right about even. In the 1970s the share of the top 1% for the national income was 9% of the nation’s wealth. Now it’s 23.5%, the highest level it’s been since right before the great depression. Now, Secretary Reich, this isn’t just about getting the money from the rich because that’s where it is, they accumulated all of the wealth at the top. It also makes sense for the rich if we had a more equal distribution of income because of the effect it would have on the middle class. Tell us about that. Why is that the case?

Reich: If the middle class gets a shrinking portion of total income as has been the case over the last few years, the middle class doesn’t have the purchasing power to turn around and buy the stuff that America can produce. And that means high unemployment and slow economic growth. We can’t have an economy that is getting out of the gravitational pull of the great recession based upon the purchasing of the top 1% or top 5% or even the top 10%. The way we actually grow the economy is through spreading the benefits of economic growth and economic change. You know, the top 1% or top 0.1 of 1% would be better off with a smaller share of a rapidly growing economy than they would be right now with a large share of an economy that is groing painfully slowly and is still having a hard time getting out of this great recession.

Uygur: Right, and we know that partly because of during the Clinton administration, which you worked at, we created 22 million jobs, we had a booming economy when we had the higher tax rates, and it didn’t hurt the economy at all when we had those higher tax rates. You made a great point in your last article on this issue. In 2005 17 million people bought cars and in 2010 only 12 million people bought cars, and home sales went from 7.5 million to 4.6 million. Now if people are buying less cars, less homes, and less everything, how are corporations and rich people suppose to make money? It hurts everybody, doesn’t it?

Reich: It not only hurts everybody, but it breeds a kind of anger. So many middle class people, lower middle class people, lower class people are frustrated. They are anxious. They are worried about paying their bills. Tthey see people at the very top getting away with the equivalent of murder. Look at what happened on Wall Street. There’s not a single Wall Streeter who has actually been indicted or brought to justice after that huge implosion on Wall Street. And people get cynical and they get angry. And then they see, you know, Republicans are very good at channeling that anger toward government, immigrants, public employees. Well, an angry population and an angry populist could just as easily turn their anger toward the very rich. It’s in the interest of the people at the top to actually call for a more equitable contribution of the gains of economic growth, and a better tax system, a tax system that is fair.

Uygur: All right. Former Labor Secretary Robert Reich, very clear. Thank you for your time tonight.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business.
Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission.
In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.

Barefoot Accountant

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